In an effort to spur the economy, the federal funds rate has been near zero since December 2008, but some economists contend that keeping interest rates so low doesn’t help the economy, and in fact, could raise inflation.

Critics say that the low rates contribute to banks not lending to consumers and small businesses. “One of the reasons lending is having such a hard time getting off the ground is that interest rates are so low,” Brian Wesbury, chief economist at First Trust Portfolios, told CNN. “Why would someone lend to a risky small business at 3.5%, especially if you expect rates to go up?”

Bernanke and others believe that raising interest rates could derail recent economic gains, especially in the housing market. Analysts say even a modest rate increase could lift mortgage rates and create another wave of home foreclosures, according to CNN.

“You are in that period where the recession is over but you don’t have job growth. And until we get job growth, nobody is going to believe the recession is over,” John Canally, an economist for LPL Financial in Boston, said in a Wall Street Journal article.

The unemployment rate tops 10 percent in 14 states, according to the Labor Department.

While the business climate is getting better, the report also noted that the commercial real estate market is still weak. Regional banks haven’t freed up business lending, so many empty storefronts remain vacant.

Cities with federal projects funded by the federal stimulus bill, such as Cleveland, Chicago, Minneapolis and Dallas, are the only areas reporting an increase in commercial real estate activity, according to the Wall Street Journal.

The 30-year mortgage rate hit a low of 4.78 percent earlier in the year but has climbed since. This year’s numbers are significantly better than last year at the same time when the 30-year rate averaged 6.52 percent. The average rate of 15-year and 5-year fixed mortgages also rose slightly last week.

Economists believe the housing market has stabilized but worry that even small credit rate increases could deter people from buying new homes.

The U.S. is a historically mobile society. The most movement happened in the 1950s and 60s, when about 20 percent of the population moved each year. The percentage of people changing residences fell to a historic low of 11.9 percent in 2008, according to U.S. Census data.

Because many people are having trouble selling their homes, they can’t relocate to an area where jobs are more plentiful.

“The labor markets are sluggish. They’re not adjusting efficiently,” economics professor Richard Cebula told MSNBC.com, adding the situation “exacerbates a recession.”

A slight glimmer came in the form of an announcement March 17 that construction of new homes and apartments jumped 22.2 percent in February compared with January, a larger-than-expected bump.

But even that good news was tempered by the fact construction activity is still down 47.3 percent from last year, according to a March 17 story by The Associated Press.

Fundamental weaknesses in the job and credit markets and still-rising inventory are still a major drag on any hope of a real rebound.

All of this was central to the Federal Reserve’s two-day meeting where they left a key bank lending rate at a record low to try to jumpstart the economy.

According to the AP, all areas of the country reported an increase in housing starts in February, except the hard-hit West. Applications for building permits rose, also, gaining 3 percent with permits for single-family homes up 11 percent.

Now economists are watching for signs historically low interest rates may finally be triggering inflation.

Core inflation, which excludes energy and food, edged up 0.2 percent in February, only slightly higher than the 0.1 percent gain economists had expected, the AP said. Core prices had risen 0.4 percent in January, the AP said.

“Only last summer, Fed officials had started to worry that a surge in energy costs could spread to other areas of the economy and boost inflation to unacceptable levels,” the AP said. “But after the financial crisis struck in the fall, the Fed switched signals and is now aggressively fighting a deepening recession with no real threat of inflation.”

Ironically, economy-wide job loss has tempered inflation fears as widespread layoffs depress wage demands, the AP said. Many economists say the Fed will not even contemplate interest rate increases until the unemployment rate, which soared to a 25-year high of 8.1 percent in February, declines, the AP said.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ending April 3 increased 4.7 percent to 1,250.6, Reuters reported on April 8.

Good news also came in the form of the quality of buyers, which was high, Cameron Findlay, chief economist at Charlotte-based LendingTree.com told Reuters, basing that estimation on high credit scores and low loan-to-value rations.

So how low are interest rates?

Reuters reports that borrowing costs on 30-year fixed-rate mortgages averaged 4.73 percent, compared to 5.78 percent a year ago.

All this comes as the U.S. housing market faces its worst downturn since the Great Depression, Reuters said, with many experts hoping a real estate stabilization was underway.

Incentives such as the first-time homebuyer credit are also affecting demand, Bob Walters, chief economist at Quicken Loans, told Reuters.

Refinancing is also on the move.

According to the MBA, refinancing increased 3.2 percent to 6,813.5.

Fixed 15-year mortgage rates averaged 4.49 percent, up from 4.45 percent the previous week. Rates on one-year ARMs increased to 6.23 percent from 6.20 percent.